Making Y2K Pay

FH Faulding is tackling the Y2K problem head-on, and using the conversion process to its advantage.

Australian-based pharmaceutical multinational F H Faulding Ltd has launched a year 2000 (Y2K) compliance project that aims to improve the way the corporation operates. The Adelaide-based company is undertaking a major process re-engineering program to identify and fix its Y2K problems as well as improve how the organisation operates, both internally and with its suppliers and customers.

Under the guidance of Faulding's vice president information services, Teri Whiting, the project is intended to deliver bottom line benefits to the company. "We may not turn a profit, but we definitely aim to make the business operate more efficiently as a result of the investment going into year 2000 compliance," she says. "Discussing the year 2000 issue at Faulding is a matter of how we managed and approached the project. It's about the entire mixture of culture and approach.

"Faulding has a very strong business identity. That's very important for the buy-in. What has been fundamental to our success is the buy-in issue, achieving the total commitment of the board of directors and CEO," Whiting says.

F H Faulding is Australia's largest health care company. The corporation operates three core businesses around the world: oral products, injectable products and health products. Each business operates a full supply chain with vertical integration. The company's IT section spans those three businesses.

With a market capitalisation of more than $900 million and operations in 52 countries, including major research facilities in Adelaide, Melbourne and New Jersey, the company faced a major task to ensure its operations would not be jeopardised when the calendar rolled over to January 1, 2000.

Whiting joined Faulding in the VP IS role in mid 1997, after working for a number of years in the public sector, including the Commonwealth government and Victorian government, where she ran the Corporate Services Division of the Department of Justice. Whiting, who also holds the position as chair of the South Australian Film Corporation, came to Faulding with the goal of taking a relatively small information technology function into line with the business operations.

"Faulding is one of the most exciting companies in Australia and, indeed, in the world," she says. "I wanted to bring IT into line with business outcomes, with return on investment. It was a great opportunity to be offered that; to see if I could do it. Technology has to fit the corporation. Faulding has grown by both internal growth and acquisition."For its size, Faulding has tremendous diversity. It's involved in research and development, production and manufacturing, distribution and the retailing industry in Australia. "With this diversity, to try and deal with the year 2000 problem becomes an interesting challenge," Whiting says. "In the company last year, the worst thing we had happening to us was the hype in the media. There was an attitude that we had better do something about it, but that it was an IT problem.

"A year 2000 project had started at Faulding a year before I arrived, but it had not gone outside the IT division. To make it work, the directors and the board had to hear the business issues.

"In one session with my team, I was able to convince the top people at Faulding that it [year 2000 compliance] was a business issue." Whiting says that recognition of year 2000 as a business issue generated a corporate priority to address the challenge in a constructive manner.

"From the board of directors down, particularly with the chief executive officer Dr Ed Tweddell, there was a quick perception that it was a business issue and then they went out and championed it," she says. "It was very important that we had that real championship and ownership of the issue. It needs to be a strategy that has a pointy end; that has a focus.

"The role of the business champions was to get out and keep everything stirring. At the management level, what they are seen to do is critical. Among staff, there is always the competition between resources to deliver their daily outcomes and the year 2000 issue."Whiting declined to discuss the size of the budget for the Faulding Y2K project. "In terms of cost, it's within our capabilities," she says. "It's certainly not in the hundreds of millions. It's within a ballpark that is comfortable for Faulding to achieve and still maintain profit and growth.

Faulding has three businesses, so we in IT have to come to agreement with each business about the cost of the project to their business. That's a difficult row to hoe, but the outcome is best for the business in the long term."Unlike many large corporations, Faulding is not a mainframe house. Worldwide, the organisation has built up its IT infrastructure on local area and wide area networking capability. Currently the company is in the process of moving from Windows 3.11 to Windows NT as well as building its capability to support network PCs by adding functionality to its Windows NT and Unix servers.

At its Adelaide head office, the company moved from using Macintosh desktop computers -- at one time, it was the largest Mac site in the State -- to a Windows-based model, providing it with a global PC standard. For its production functions worldwide, Faulding uses a manufacturing system called MFG Pro which runs on the Unix and Windows NT operating systems.

Faulding's first Y2K project involved its distribution activities where the DEC VAX-based environment had "gone past its use-by date in terms of year 2000".

However Whiting says the company's Y2K exposure extended beyond standard computer systems to production facilities and embedded chip-based systems, some of which had been in operation for many years.

To achieve the goal within the two-year time frame, Whiting put together a core project team. "For our project director, we chose a very senior person with a solid history in Faulding as well as having an IT background, and that person also brought very strong project skills," she says. "We did a two-step approach to select the rest of the team. Obvious skills were good communication. We chose a couple of very good IT people who had worked hands-on throughout the organisation and knew what sort of IT environment was out there.

"We then went out on purpose and chose a site coordinator who was a business person, not someone with IT skills and not necessarily from management," says Whiting. "This was someone who was respected because they worked at the coalface of the business. There was also a site champion, a senior manager at the site. Then we got an outside firm in to examine the team and its potential strengths and weaknesses within three months of it being established."In order to achieve widespread recognition among staff, Faulding developed a campaign for the program, called Challenge 2000: Millennium Change Coming Soon.

The emblem for the campaign was a cardboard cutout with a knight mounted on a horse. This was placed on the reception desk at each Faulding facility.

"Firstly, we took our champions, the directors and the CEO, and went public with staff about the year 2000 problem as a business issue, not an IT issue," says Whiting. "We didn't get involved in glamorising the issue. It's important to use the question: 'Have you thought about . . .?'. For example, people whose equipment has moved off the asset register because it is more than seven years old, were asking: 'Have you considered this?'"We have had technical people out there talking about the day-to-day issues of the business," says Whiting. "I have come out of an environment that was project driven and outcome driven. I have seen over many years that the projects that win are the ones that forget they are a project team. The ones that lose are those that laud it over everyone and the whole thing collapses when the team finishes.

"The message I'm really spruiking is that I have a great loyal team of IT people and I can't tell they are IT people because they are out in the business and the people who are running the whole show are the people from the business."An example of Faulding's "buy-in" strategy to engage the involvement of its staff was that it informed them about how to fix their home computers in relation to the year 2000 issue. "We talk about year 2000 in a way that people can relate to it in their daily lives," says Whiting. "It's the people side of the coin. This brought it to everyone's attention.

"Also we tried to mirror the culture of every organisation in each country where we operate. For example, employees in the US have different work culture to those in Australia. Challenge 2000 has a local identity by site and a cultural identity by site."The Challenge 2000 project comprises two phases: Phase One involved auditing systems to identify the exposure while Phase Two is the workthrough associated with Y2K projects. Whiting says it was important for managers to think "outside the square" in relation to Y2K exposure. "A key question is how to solve the problem while delivering a marketing edge," she says.

"A lot of organisations look at year 2000 projects as a zero sum gain, as money spent that will only ever deliver the ability to stay in business on January 1, 2000. We are looking at it as a chance to get a return on our investment by examining how our business operates. We are using this as an opportunity to re-engineer the business. We are asking is this a business-critical area? Is it compliant? Do we need to re-engineer to reduce to risk or improve the productivity? It provides us with an opportunity to actually think things through.

"At Faulding, people are very clear about why money will need to be spent, where it will be spent and what the returns will be," says Whiting. "In terms of business opportunities, there's lots of room to work with your suppliers.

You have the opportunity to model your business. You have to identify what is mission-critical, what you can replace and what you can fix. That doesn't mean we have to fix everything, but you need to have good recovery plans."Faulding's corporate-wide Y2K project kicked off in August 1997 and is scheduled to finish by July 1999. It is currently on track to wind up by January of that year. Whiting says the project to date suggests the company's Y2K exposure "is not phenomenal".

"Faulding is a pretty young company in terms of technology," she says. "Our main exposure was probably the VAX, which is now well in hand." Other exposures, according to Whiting, are spot areas such as where old machinery has been pulled out of the manufacturing line, but is still being used in product development. "We've been able to identify these exposures fairly quickly because of the involvement of people from the business. We couldn't have done it as fast from an IT perspective without them."Whiting says the project was also on track to deliver measurable business improvements along with Y2K compliance. "The main deliverables will be that we will be able to re-engineer a couple of areas, improving productivity and speed," she says. "There are also a couple of areas where we can probably reduce cost by streamlining some activities.

"When we take remedial and replacement action on one particular area, we may take the next step, looking at it from the point of view of overall business operation rather than just fixing the problem," says Whiting. "This could mean that we may well move to a new generation of a particular software package, delivering benefits such as enhanced reliability and speed and more functionality rather than just avoiding the Y2K problem. That's the advantage of having business people locked into the process. Historically IT people are driven by asking: 'How do we fix this?'."Whiting says Faulding is conducting ROI (return on investment) analyses on each of these compliance projects. "This project is aimed at making every dollar work for us on the bottom line," she says.

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